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FATF’s demands

October 21, 2018

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IT is not unexpected, but it is hugely disappointing. Pakistan’s continued entanglement with the Paris-based Financial Action Task Force has been an object lesson in how not to address complex international legal obligations in the financial sector. FATF is an opaque organisation and the demands it puts on countries when it comes to anti-money laundering and counterterrorism financing regimes can be onerous. Indeed, the delegation of the Asia Pacific Group of FATF that visited Pakistan and expressed its overall dissatisfaction with the steps Pakistan has taken to remove itself from a so-called grey list also noted that the country has made some progress against the benchmarks that have been set. What is puzzling, however, is why the Pakistani state has not been more vigorous in addressing the shortcomings that FATF has identified. After all, money laundering has become a significant political issue in Pakistan and the PTI government has vowed to crack down on what it claims is an enormous racket. Should not the government be eager to demonstrate its bona fides when it comes to a global net that is tightening against money laundering? With the grey-listing having occurred under a previous government, should the new dispensation not be eager to move swiftly and decisively to curb money laundering and terror financing?

The country’s latest entanglement with FATF could be an opportunity to address some underlying structural deficiencies. The list of consultations that were held by the visiting APG delegation is vast: the ministries of interior, finance, foreign affairs and law; the SECP; the State Bank; Nacta; the FIA; the FBR; NAB; ANF; the Central Directorate of National Savings; and the provincial counterterrorism departments. The scale of cooperation required across a range of government institutions and organisations is likely proving an obstacle. Do those organisations have the capacity, skill and will to address a complex set of demands by FATF, or is it the case that individuals in those organisations are merely passing the buck and waiting for high-level political intervention at the last possible moment? The draining out of institutional capacity and the hollowing out of government departments and state institutions is a long-term malaise that the FATF predicament has perhaps helped to further expose. The road back from the FATF grey list may involve a great deal of other changes in Pakistan’s approach to complex international obligations.

There is never a good time to deal with a problem such as being grey-listed by FATF, but given the current economic predicament of Pakistan, the challenge could scarcely have come at a worse time. The PTI-led government has inherited a wide range of problems, but it needs to transition from blaming its predecessors to putting in place effective strategies so that it can address the problems it faces.

Published in Dawn, October 21st , 2018